Indian office markets remain robust despite global geopolitical challenges

The global geopolitical challenges notwithstanding, India’s office markets reported vibrant real estate activities during Q2 2024. The quarter has already set the tone for robust leasing and construction activities for the current calendar year. That’s not all. Real estate activities are anticipated to increase further on the back of strengthened demand from IT-ITeS and BFSI sectors. Flex spaces are also likely to play a pivotal role in the growth of office markets in the country. This is what Chicago-headquartered Vestian, whose service portfolio includes investment and consultancy services, among others, suggests.

In India, IT-ITeS sector dominated absorption with 38 per cent share in Q2 2024, followed by BFSI and consulting services at 12 per cent and 10 per cent, respectively. Flex spaces accounted for eight per cent of the total absorption during the current quarter. Interestingly, AI and robotics companies accounted for 21 per cent of Bengaluru’s absorption in Q2 2024, as per available office market reports. Rapid global advancement of artificial intelligence, combined with a supportive ecosystem, has significantly driven the demand for office space in the garden city.

Overall, the IT-ITeS sector, including AI and robotics, accounted for 69 per cent of the city’s absorption in Q2 2024. Looking at the city-wise break-up of India’s office market absorption, Bengaluru contributed the highest to pan-India absorption with 25 per cent share in Q2 2024, followed by Hyderabad and Mumbai at 20 per cent each. Meanwhile, Pune reported the highest quarterly growth, around 307 per cent, in value terms, whereas absorption declined by 48 per cent in Chennai during Q2 2024. NCR also witnessed a quarterly decline of 37 per cent during the period. Incidentally, all cities except Chennai and NCR reported an increase in absorption on quarter and on year. Absorption reached 17.04 mn sq. ft. in Q2 2024, registering an increase of 27 per cent over the previous quarter and 23 per cent over the same quarter a year earlier. The surge, according to real estate market experts, could be attributed to the improved global macroeconomic scenario and India’s robust growth amid global geopolitical challenges.

Quite significantly, new completions also followed a similar trend. They increased by 17 per cent in H1 2024 over H1 2023, reaching 23.2 mn sq. ft. Additionally, Q2 2024 witnessed a quarterly increase of 15 per cent and a yearly rise of 10 per cent in new completions. All cities, except Pune and Bengaluru, witnessed an uptick in construction activities during the current quarter compared to the previous quarter. Moreover, Mumbai reported 3.3 mn sq. ft. of new completions during Q2 2024, registering the highest quarterly rise of 230 per cent. Even here, Bengaluru dominated new completions with 28 per cent share, closely followed by Mumbai with 27 per cent. The southern cities (Bengaluru, Chennai, and Hyderabad) accounted for 57 per cent of the total new completions reported in Q2 2024. However, one has to remember that the share dropped from 63 per cent a quarter earlier.